New-Hire Setup Checklist: What Small Businesses Should Do When Hiring an Employee

Bringing someone onto the team involves more than agreeing on a salary and setting a start date. Employers must prepare payroll systems, collect tax documentation, arrange required insurance coverage and establish bookkeeping procedures to track employment expenses accurately.

A consistent new-hire setup checklist can help business owners meet their tax and reporting obligations, avoid payroll errors and ensure the necessary financial and administrative arrangements are in place before an employee's first day.

Establish a Complete Employment Budget

When budgeting for a new employee, businesses should account for the following expenses:

• Employee wages: Calculate the expected annual salary or hourly wages, including anticipated overtime, bonuses and commissions.
• Employer payroll taxes: Budget for the employer's share of Social Security and Medicare taxes, along with applicable federal and state unemployment taxes.
• Insurance costs: Account for required workers' compensation coverage and any other applicable employment-related insurance.
• Benefits and contributions: Estimate employer contributions toward health insurance, retirement plans, paid leave and other benefits offered.
• Equipment and training: Include computers, software, uniforms, onboarding and other expenses associated with getting the employee ready to work.

Confirm Compensation and Payroll Classification

Before processing the employee's first paycheck, verify their agreed-upon compensation, pay schedule, and eligibility for overtime. Employees must be correctly classified as exempt or nonexempt under applicable wage and hour laws, since receiving a salary does not automatically make someone exempt from overtime requirements.

Collect Required Employee Tax Documentation

Accurate employee information is essential for proper payroll processing and tax reporting. Before the first payroll run, collect and verify the necessary documentation.

• Form W-4: Have the employee complete the federal Employee's Withholding Certificate so payroll withholding can be calculated appropriately.
• Form I-9: Complete the employment eligibility verification process within the required timeframes and follow applicable document examination and retention rules.
• Employee information: Record the employee's legal name, address, Social Security number, start date and other necessary payroll details.
• Arizona income tax withholding: Inform new employees of their state withholding options and make Form A-4 available so they can select their preferred withholding rate.
• Arizona new-hire reporting: Report the employee to the Arizona New Hire Reporting Center within 20 days of their hire date, as required by state law.
• Direct deposit information: Obtain the necessary banking information if the employee will be paid through direct deposit.

Arrange Benefits Enrollment and Contributions

If your business offers employee benefits, make sure the new hire receives the necessary enrollment information and that any applicable contributions and deductions are set up correctly.

• Explain available health insurance, retirement plans, paid leave and other benefits, including enrollment deadlines.
• Provide the necessary enrollment forms and submit completed information to benefit providers.
• Confirm the employee's share of premiums or retirement contributions and configure payroll deductions.
• Verify that employer contributions and other benefit expenses are recorded correctly in your accounting system.

Get Your Business Ready for Its Next Employee

H&H Accounting Services can help your business maintain organized financial records, understand payroll-related expenses and prepare for the accounting responsibilities that come with growing your team.



Contact us at (480) 561-5805 to discuss how our bookkeeping and accounting services can help you manage the financial and tax-related responsibilities of onboarding new employees